Japan is in the midst of a demographic upheaval that has far-reaching implications for its society and economy. As the nation celebrated “Respect for the Aged Day,” a holiday meant to honor its elderly citizens, the underlying statistics paint a more sobering picture — Japan is rapidly becoming one of the oldest countries in the world, and its shrinking workforce could pose a severe threat to its long-term economic health.
Data released by Japan’s Ministry of Internal Affairs and Communications shows that as of this year, the number of Japanese citizens aged 65 and older has surged to 36.25 million, accounting for 29.3% of the total population. This marks the highest proportion of elderly citizens in any country globally and underscores Japan’s ongoing demographic shift. As the country’s birth rates continue to decline, and its life expectancy remains among the highest in the world, Japan finds itself grappling with an increasingly imbalanced population structure.
This demographic imbalance is having profound effects on the country’s labor market. Many sectors are experiencing chronic labor shortages, with a recent survey by Teikoku Databank revealing that more than half of Japanese companies report a lack of full-time employees. According to Robert Feldman, chief economist at Morgan Stanley MUFG Securities, this issue is particularly acute in industries like food services, where labor shortages are hitting hardest. The growing number of elderly workers has provided a temporary buffer, with over 9.14 million workers aged 65 and above still actively employed, but as these workers begin to retire, the country faces an uphill battle to replace them.
Japan’s Shrinking Workforce: A Looming Threat
The problem of labor shortages is compounded by the overall decline in Japan’s working-age population. According to projections from the National Institute of Population and Social Security Research, Japan’s elderly population is expected to grow further, reaching 34.8% by 2040. Meanwhile, the working-age population is shrinking at an alarming rate. By 2050, Japan’s total labor force could plummet to just 49.1 million, down from 69.3 million today, if current trends continue.
To counter these trends, Japan’s government has implemented a range of measures aimed at boosting birth rates, such as offering financial support for child-rearing and investing in child-care infrastructure. However, these policies are unlikely to yield immediate results, and the challenges posed by the country’s aging population persist. In addition to domestic reforms, Japan has also turned to foreign labor, with the country’s foreign-born workforce reaching a record 2 million in 2024. However, this is only a fraction of the tens of millions of additional workers that experts believe will be necessary to stabilize the labor market in the coming decades.
As Japan faces this unprecedented challenge, it is clear that a combination of technological, social, and structural changes will be necessary to ensure the country’s long-term economic stability.
